What is Dropshipping?
Dropshipping is when a third-party, i.e. a supplier delivers items to your customer on your behalf. It is better for smaller and medium size businesses.
When a customer buys something from your website, you will access your dropshipping account and place the order, providing the customer’s delivery address in place of your own.
For example, a customer buys a headphone set on your website. You sell it at the R.R.P. of $39.99. You will then log into your dropship suppliers account and buy the item for $30.00 wholesale price (with dropship admin fees, postage costs and VAT applied) you will make a profit of $9.99.
How dropshipping works
Pros of Dropshipping
- You do not have to hold stock. This is ideal if you are operating an eCommerce store out of your home.
- You can process orders faster, leaving time for you to focus on sourcing new products and marketing.
- You can minimize administrative and postage costs.
- You do not have to worry about product images as your dropshipper will supply these.
Cons of Dropshipping
- Your profit margins may be low due to administrative charges applied to your dropshipping account. This means that you are more likely to see a higher return on investment than if you opt for a standard wholesaler account.
- You may find that your dropship supplier is your biggest competition. Many dropship providers have their own website, often long established, they will have a higher Google rank and offer discounts that you may not be able to compete with.
- Your dropship supplier may restrict where you can sell items. For example, they may stipulate that you cannot sell their products on eBay or Amazon.
- Dropship suppliers will not handle your return items. If, for whatever reason, the customer does not want the item, you will need to set up a business parcel return service, or find an alternative address, for customers to return unwanted items. You will then have to pick them up from this address or pay extra to have the items delivered to your home address. It is then up to you to try to sell the unwanted items. Rarely, will your dropship suppliers buy the items back from you.
- You do not have control over order fulfilment and timely deliveries. Drop-shipped orders can take longer to reach your customers’. Remember that your dropship suppliers are dealing with hundreds or thousands of other account-holders like yourself. There is a wait, and you may find the item is out of stock by the time you place your customer’s order. This delay will reflect badly on your business and you can lose customers as a result.
- The market is saturated with eCommerce sites offering the same products from popular dropshipping suppliers. Unless you have something different to offer, you may not see a high return.
- Do not copy and paste from your dropship suppliers’ website. This will have a negative impact on your search engine rank.
- Do not issue a refund to the customer until you have confirmation from the postal returns service that they have received the item.
- Provide your own invoice to the dropshipper which they can include with your customers’ orders. This will ensure that the customer knows the item came from your website and not your dropship suppliers.
- Go for high-value items for a good return on investment.
- Do your research. Many dropshipping suppliers sites are spawned from a single dropship provider, all of which are selling the same products. If you want to succeed in dropshipping, you need to offer something different from the competition.
How to find dropship suppliers
- Use the Salehoo dropship directory to quickly find suppliers, useful tools, free guides about starting a dropship business, plus direct access to dropship communities.
You can search for wholesalers online and ask them if they will consider dropshipping their products. Some do, but they do not openly advertise this option.